If you are looking for a real-world example of how tax policy can impact the economy, look no further than the Hamptons area of Long Island.  With last year’s GOP tax overhaul capping deductions for mortgage interest and property taxes, sales of second homes have been hit hard.  According to a Bloomberg article this morning, the number of Hamptons luxury houses with “For Sale” signs in front of them swelled to 869 at the end of the first quarter.  That’s nearly triple the number that were listed for sale at the same time last year and is the highest level in at least seven years.  While inventories of luxury homes in the Hamptons are ballooning, sales are falling off a cliff as Q1 sales in the region were the lowest for the first three months of the year in at least seven years!

Based on the trends of rising inventories and slowing sales, the article goes on to say that at the current pace it would take 7.5 years to sell the available inventory of luxury homes- another record.  The article went on to quote the President of one firm as saying that the market is in a period of ‘transition’.  That would be putting it mildly!

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With the S&P 500 closing just above its former record high yesterday, one would think the last seven months have been nothing more than running on a treadmill for the stock market.  A look deeper, though, shows that there has been no shortage of big winners (and losers) in terms of industries.

The table below shows the ten best and worst performing S&P 500 industries since the S&P 500’s 2018 closing high on 9/20.  Eight of the biggest winners are all up over 10%, including one – Power & Renewable Electricity- which is up over 20%.  Who would have thought that an industry from the Utilities sector would have led the market? Outside of Utilities, Technology has been a big contributor to the market’s strength with three industries in the top ten (Communications Equipment, Software, and Semis).  Another surprising sector with representation on the list is Consumer Staples.  Both the Personal Products and Household Products industries are up 14.8% since the S&P 500’s 2018 high.

On the downside, Energy has been a drag as Energy Equipment and Services has dropped over 23% since 9/20 while Oil, Gas & Fuels is down 6%.  One would think that with oil prices so high, that this group would have done better, but no such luck.  Two groups that have felt the pinch from higher energy prices (and other issues like the 737) are Airlines and Air Freight. Both of these industries from the Industrials sector are down close to 10%.

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Here’s an interesting chart to start your day:

As earnings season has come to life, gold has completely flat-lined in the last few trading days.  Take a look at the chart below which shows the YTD performance of the SPDR Gold Trust ETF (GLD).  Over the last four trading days, the spread between the intraday high and low over that period has been just 0.40%.  While that narrow a spread is notable enough, its the third time this year that GLD has gone into one of these four-day nap periods where the spread between the intraday high and low was less than 1%!  Like the last two, will this one be another pause that refreshes?

What’s even more notable about the recent narrow range for GLD is that since the ETF started trading in 2005, there has never been a four-day period where the spread between the intraday high and low over those four days has been narrower.  Volatility isn’t just lower in the equity market as gold has become increasingly less volatile in recent years.

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Here’s a snippet from today’s report:

You wouldn’t know it by the pace of reports today but this week and next are the two busiest of the Q1 earnings season as more than 300 companies in the S&P 500 are scheduled to report.  The peak day for earnings of S&P 500 companies comes on Thursday (4/25) when 64 companies will report.  Today, though, only seven companies are on the calendar.  The next time there will be a day with fewer reports isn’t until May 10th!

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Here’s a snippet from today’s report:

Following the recent settlement between Apple and Qualcomm (QCOM), we wanted to check up on the status of our comparison between the relative strength of semiconductors and the performance of the S&P 500.  We have highlighted the leadership of semis numerous times in the last several weeks, and QCOM’s surge over the last two days has caused the group’s relative strength to soar to levels not far from last year’s high.  As we have mentioned in the past, every major decline and rally of the last six years has been preceded by a move higher or lower in the relative strength of the semis.  Emphasis is often placed on the importance of the transports in determining the direction of the market, but in recent years the semis have been a much better tell.

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Here’s a snippet from today’s report:

We have a lot to get to in this morning’s report, but below we wanted to highlight one interesting aspect in terms of where global equity markets stand now compared to three months ago.  If you haven’t looked at equity index charts from around the world recently, it may surprise you to know that as of yesterday’s close no less than seven major national indices are within 1.5% of new 52 week highs on a closing basis with India and China marking their best closes of the past year. Another 7 major country indices are within 6% of that level, and only one (Malaysia’s Bursa Malaysia Index) is more than 11% below 52-week closing highs.

In the left chart below, we show distance from 52-week closing and intraday highs for the global markets covered in our Global Macro Dashboard. What a change it’s been over the last three months. In the second chart at right below, we show the same metrics as-of three months ago. Only 2 indices were within 6% of 52-week highs at that point, and seven were at least 15% below their best levels of the year prior.  The risk asset rally since the end of December has lifted a lot of ships. With this kind of backdrop, one would think central banks around the world would be more biased towards tightening than cutting!  For an updated set of charts and other metrics covering each of the countries below, make sure to check out our weekly Global Macro Dashboard.

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